Sega Earnings Revision

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Big drop in expected profits.

By IGN Staff

Sega today announced a drastic revision in its earnings outlook for the current fiscal year, reducing its net profit estimate by 72%. The company now expects its profit for the year ending March 2003 to total 5 billion yen, rather than 18 billion as estimated this May. Sega stock dropped 300 yen, the maximum allowable daily decrease, to 1,212 yen, the lowest price it's seen in 22 months.

According to a report by Reuters, Sega is blaming lower-than-expected sales of NFL 2K3, as well as a few key delays in titles originally expected to make the holiday shopping season (such as Panzer Dragoon Orta). "We miscalculated financial targets for this year because of over-confidence stemming from results last year and a lack of experience as a third-party software publisher," said president Hideki Sato.

In a curious move, Sato admitted "total defeat" to Electronic Arts, whose Madden NFL 2003 considerably outsold NFL 2K3. Industry analysts observed that Sega's original projections for sales of NFL 2K3 were quite irrationally optimistic, drastically overestimating its potential success in its first year of direct competition with the strong Madden brand. Sega expected to move 1.6 million units of the game on PlayStation 2, a level it could only be expected to reach after years of steady promotion in opposition to Madden. In reality, it only sold around 300,000 units.

Sega cut its full-year global software sales goal from 20 million units to 12.6 million, 14% fewer units in comparison to last year. As a consequence, its consumer business will not turn a profit -- Sega expects an operating loss of 5.4 billion yen for the home game side of its business, where it had originally expected to make 8 billion yen.

CEO Tetsu Kayama attempted to reassure investors and analysts at a press conference. "Now we will tighten our grip to improve the quality of games and to save on development and sales costs," Kayama said. "Our goal to become the world's leading game software publisher remains unchanged."